Bitcoins
What is Crypto Currency?
Crypto Currencies are just lines of computer code that hold monetary value. Those lines of code are created by electricity and high-performance computers. Crypto Currency is also known as digital currency. Either way, it is a form of digital public money that is created by painstaking mathematical computations and policed by millions of computer users called ‘miners’. Physically, there is nothing to hold. ‘Crypto’ comes from the word cryptography, the security process used to protect transactions that send the lines of code out for purchases. Cryptography also controls the creation of new ‘coins’, the term used to describe specific amounts of code. Governments have no control over the creation of Crypto Currencies, which is what initially made them so popular.
What Are Bitcoins?
Bitcoin is the initial virtual banking currency of the internet. Which was created in 2009 by an unknown person Satoshi Nakamoto. Bitcoin was the first Crypto coin currency ever invented. Crypto currencies are designed for maximum anonymity.
Why Bitcoins?
Bitcoins can be used to buy any products anonymously. Also international payments are easy and cheap because Bitcoins are not limited to any country or subject to regulation. Small businesses may like them because there are no credit card fees. Some people just buy Bitcoins as an investment, hoping that they’ll go up in value.
Buying Bitcoins
You can acquire Bitcoins in 3 different ways,
1.BUY ON AN EXCHANGE
There are many marketplaces called “Bitcoin exchanges” they allow people to buy or sell Bitcoins using different currencies.
2. TRANSFERS
People can transfer Bitcoins to each other using mobile apps or their computers. It’s similar to sending cash digitally.
3.MINING
Bitcoins can be mined using computers to solve hard mathematical quests. This is how Bitcoins are created. There is a heavy competition between people in mining Bitcoins. Currently, a winner is rewarded with 25 Bitcoins roughly every 10 minutes.
Saving Bitcoins
Bitcoins are stored in a “digital wallet,” which exists either in the cloud or on a user’s computer. The wallet is a kind of virtual bank account that allows users to send or receive Bitcoins, pay for goods or save their money. As mentioned earlier, your Bitcoin wallet can be stored online (i.e. a cloud service) or offline (a hard drive or USB stick).
Still there are possibilities to loose Bitcoins from your Digital Wallet. Wallet in cloud: Servers can be hacked. Wallet on computer: You can accidentally delete them. Viruses could destroy them. The offline method is more hacker-resistant and absolutely recommended for anyone who owns more than 1 or 2 Bitcoins but it is not without risk.
Misuse of Bitcoins
Bitcoin currency can be misused in 3 main ways,
1) TECHNICAL WEAKNESS
time delay in confirmation: Bitcoins can be double-spent in some rare instances during the confirmation interval. Because Bitcoins travel peer-to-peer, it takes several seconds for a transaction to be confirmed across the P2P swarm of computers. During these few seconds, a dishonest person who employs fast clicking can submit a second payment of the same Bitcoins to a different recipient. While the system will eventually catch the double-spending and negate the dishonest second transaction, if the second recipient transfers goods to the dishonest buyer before they receive confirmation, then that second recipient will lose both the payment and the goods.
2) HUMAN DISHONESTY
pool organizers taking unfair share slices: Because Bitcoin mining is best achieved through pooling (joining a group of thousands of other miners), the organizers of each pool get the privilege of choosing how to divide up any Bitcoins that are discovered. Bitcoin mining pool organizers can dishonestly take more Bitcoin mining shares for themselves.
3) HUMAN MISMANAGEMENT
online exchanges: With Mt. Gox being the biggest example, the people running unregulated online exchanges that trade cash for Bitcoins can be dishonest or incompetent. This is the same as Fannie Mae and Freddie Mac investment banks going under because of human dishonesty and incompetence. The only difference is that conventional banking losses are partially insured for the bank users, while bitcoin exchanges have no insurance coverage for users.
Future in question
No one knows what will become of bitcoin. It is mostly unregulated, but that could change. Governments are concerned about taxation and their lack of control over the currency.
